Revlon, Inc. together with its subsidiaries announced two important steps forward in strengthening the Company’s business, capital structure and foundation for future growth. First, the Company executed an agreement with Jefferies Finance LLC that will significantly enhance the Company’s capital structure by refinancing the Company’s Senior Notes due February 2021 and 2019 Term Loan, extend the Company’s near-term maturities and deliver new funding for the business.
The agreement reached with Jefferies to provide up to $850 million in new financing will be used to repay the 5.75% Senior Notes maturing in 2021 ($500 million outstanding), repay the 2019 Term Loan ($200 million outstanding) and provide additional funding for the Company. The Company plans to close the refinancing transaction in the second quarter.
Second, the Company announced a new Revlon 2020 Restructuring Program that is expected to generate significant annualized cost reductions of between $200 and $230 million by the end of 2022. The goal of the 2020 Program is to build a stronger global business operation, enhance the Company’s cost efficiency, and improve operating margin to continue accelerating the growth in operating income and profitability that the Company saw in 2019.
Revlon 2020 Restructuring Program and Cost Reductions
Building upon the successful 2018 Optimization Program by which the Company delivered $95 million of in-year cost reductions in 2019 ($125 million on an annualized basis), the Company is implementing a new worldwide organizational restructuring designed to reduce the Company’s selling, general and administrative expenses, improve the Company’s gross profit and Adjusted EBITDA and maximize productivity, cash flow and liquidity.
The new Revlon 2020 Restructuring Program is expected to deliver in the range of approximately $200 million to $230 million of annualized cost reductions by the end of 2022, with approximately 60% of these cost reductions to be realized from headcount reductions occurring in 2020.
The Revlon 2020 Restructuring Program includes rightsizing the organization and operating with more efficient workflows and processes that the Company implemented during the 2018 Optimization Program, such as streamlining support functions and distribution activities. The leaner organizational structure is also expected to improve communication flow and cross-functional collaboration, leveraging more efficient business processes.
In 2020, the Company expects to realize approximately $105 million to $115 million of in-year cost reductions and recognize approximately $55 million to $65 million of total pre-tax restructuring and related charges, consisting of employee-related costs, such as severance, retention and other contractual termination costs. In addition the Company expects restructuring charges in the range of $65 million to $75 million to be charged and paid in the period of 2021 to 2022. The Company expects that substantially all of these restructuring charges will be paid in cash generated by the business, with approximately $55 million to $65 million of the total charges expected to be paid in 2020, approximately $40 million to $45 million expected to be paid in 2021, with the balance expected to be paid in 2022.